EUR: Attempt small longs at 1.4160/1.4100

Nicole Elliott from Mizuho Corporate Bank at 01/25/10

Comment: Stabilising and a small bounce from the 50% Fibonacci retracement from April 2009’s low (not October 2008’s low). One-month at-the-money implied volatility appears to have based around 10.00% and should now squeeze up to 13.50%. Note that on the ECB’s Effective Exchange Rate the Euro is only very fractionally over the mean of the last two years. Over the next few weeks we feel the Euro should stabilise and form a new interim low. Other currencies should also do something similar.

Strategy: Attempt small longs at 1.4160/1.4100; stop below 1.4000. Add to longs on a sustained break above 1.4225 for 1.4400.

Comment: Pity we did not get a weekly close below pivotal support at the key 127.00 area. All aspects of this weekly chart are currently suggesting a short position, and several other yen crosses too. The Euro is still very oversold and bearish momentum has eased a little. Expect a little more hesitation here today as investors fret as to what the Japanese authorities might or might not do.

Strategy: Attempt small shorts at 127.85; stop above 129.55. Short term target 127.00, then more.

Comment: Still suck between the Ichimoku ‘cloud’ and 61% Fibonacci support. Daily and weekly ‘clouds’ become very thin Tuesday and mid-February so watch for upside breaks then.

Strategy: Attempt very small longs at 1.6130; stop below 1.6070. Short term target 1.6240, then 1.6300.

Comment: Friday’s close clearly below the 38% Fibonacci retracement support has forced moving averages to cross to bearish but momentum has not increased. The US dollar is not especially oversold and futures volume on Thursday was high, suggesting many have been surprised by recent moves. We shall expect a drop to 61% retracement (88.25) this week.

Strategy: Sell at 90.25, adding to 91.00; stop above 92.05. Short term target 89.80/89.50, then 88.50.